Friday, February 25, 2005

Hello eBay

There has been a change in plan.

Missing the chance to sell Vodafone at a decent price on Tuesday I am now even more hacked off with them and do not plan to buy back into them. When I finally offload this under-performer at above 140p I think the money is going across the Atlantic. The Dollar is cheap at the moment and there are companies in the US that just don’t have UK equivalents. I am talking of course of the like of Google, eBay and Qualcomm.

I don’t plan to put any more money into Google. I am less keen on companies that depend on advertising for revenue and it has its hands in many pies it would seem.

EBay appeals the most. It is such a fantastic company. No inventory. Almost no competition. It is an integral part of everyday life for millions of people. There are even services in the US that will sell all your junk on eBay for you and take a cut. EBay of course takes its cut. The rise in automobile sales looks fantastic for eBay. In the UK it can charge between £15 and £30 pounds for hosting the transaction. How much does it cost eBay? A couple of pence I would guess.

I feel lucky with eBay. Lucky that I can buy the shares now and not in ten years time when they cost 8 times as much. Lucky that I can get them for just over $40 when they were almost $60 a few months ago.

If I plow all the Vodafone money into eBay then over 60% of my portfolio will be in one company. This obviously presents a risk. But is it stupid? I don’t think so – not with eBay. As one broker recently said, the risk – reward ratio with eBay is in the investors’ favour. And I am young and a long way from retirement. I don’t mind risk. In fact I embrace it.

Buy eBay!

Monday, February 21, 2005

Vodafone sleeps on

Shares rise, shares fall and Vodafone sleeps. Some things never change.

I have gotten bored of having half my portfolio in this sleeping giant now. If you factor in the dividends for last year, capital growth was still under 3%. This is really holding back the growth of my portfolio. I need to switch broker accounts anyway so I am going to take the opportunity to halve my exposure to VOD. That’s right, I am going to sell all my VOD shares and then spend half the money buying back into VOD in another account.

Why buy back into VOD? Well I just love the company for some reason. They are a giant of the telecoms world and generate huge amounts of cash. I feel having a holding in them gives me exposure to an important growth area in the global economy – wireless communications. And one day the share price is going to rise...

What am I going to do with the rest of the proceeds of my sale? Some will go into Big Yellow Group (BYG) and some will go into Tesco’s.

BYG will be my first small cap purchase. They offer self-storage services in their purpose-built warehouses mainly in the South East UK. I have followed them for a while and they seem like a well-run business with a strong brand. Their price to net asset value (share price divided by value of assets per share) is about 1.2 and this gives a margin of safety. I think there is a lot of scope for growth as the company looks to expand into the Midlands and the North. There is a small dividend as well – always a healthy sign.

Everyone knows about Tesco’s – a huge player in the UK retail scene that is starting to grow abroad as well. It should be a solid performer.

I will be buying the shares using Halifax’s excellent ShareBuilder product. The charge for each purchase will be £1.50! The disadvantage is that the purchase date is set in stone so I just hope the shares don’t go up too much in the mean time.

Till next time.

Thursday, February 17, 2005

Google is the one

Ah the joys of writing blogs in a text box in Internet Explorer! I have just lost my article about why I bought Google! From now on I am going to type in Notepad or something and save my work regularly and only paste into Blogger when I have finished. :-<

The news was that I have bought 10 shares of Google and am feeling very optimistic about them. Continental Airlines were too risky and Qualcomm was too slow a grower - I already have a slow, solid bet in Vodafone.

Better post this before the cat jumps on to the keyboard or something!

Tuesday, February 08, 2005

A tale of three companies

Next week I plan to invest some money in the US market. The money has been freed up by selling my Centrica shares (couldn't really remember why I bought them and I didn't see much future excitement for them!) Once the money has cleared its way into my US capable broker account it will be time for action.

I have identified three companies that I like:


If only I had got in at the IPO! Google seem to have their hands in every type of internet activity at the moment. Search engine, email, usenet groups, blogs ... the list goes on. I haven't researched them thoroughly yet but when it comes to indexing all the information in the world Google seems to be a step ahead of the competition. Of course the share price looks crazy with a trailing P/E of 130 but this company is growing so fast it may still be a great investment.

One negative is that I already have exposure to Ebay, so to have over a third of my portfolio in internet stocks may not be prudent.


Qualcomm owns a load of CDMA patents. CDMA is the technology that enables 3G telecommunication (video messaging and the like.) 3G is up and running around the world but is in its infancy. In today's connected world the growth possibilities are enormous. With the price at a post-bubble sober level and the company winning awards for being one of the best financially managed companies in the US it is definitely worth further investigation.

Continental Airlines

People would say that Google is a risky purchase with its massive P/E, but I would say CAL is far more risky. Owning shares in an airline is like walking through Baghdad without a bullet proof vest. Come high oil prices, terrorist attack or recession and airlines will be one of the hardest hit. Having said that CAL has already been hit very hard and is now showing signs of recovery. Valuing shares that do not currently make a profit is difficult but I think CAL could make a great recovery play if I feel brave enough.


The conclusion is that more research is needed! I don't think I would pass my due diligence checklist (see earlier post) on any of these companies.

I will publish my conclusions as I go along.

Good luck all value investors!